I think it’s fair to say that many of us feared the worst when Staffline shares were suspended at the end of January. So it’s a welcome relief to be able to report positive news this week for this SIF folio stock.

I’m also pleased to have a new stock to consider for the portfolio. Car dealership group Lookers is undoubtedly a contrarian choice at the moment, but I’ll be looking at the numbers and deciding whether to add the stock to the SIF folio.

Staffline: What really happened?

After shares in blue collar recruitment group Staffline (LON:STAF) were suspended following allegations “in respect of invoicing and payroll practices”, I took another look at the firm’s historic cash flow. I didn’t find anything resembling a smoking gun, but I was still concerned about the situation.

After an independent legal investigation, one problem has been confirmed. The company is working with HMRC “to quantify underpayments made in the past to workers, over a number of years prior to 2018”.

It seems the company may have breached minimum wage regulations by not paying staff in certain food production facilities for time spent donning protective workwear before their shifts. An existing provision for this problem has been increased by £3.5m as a result of this investigation.

My view: This news isn’t as bad as it might have been. I’m still a little unhappy to see exceptional charges of £23.5m this year, but on balance I share Graham Neary’s view that the shares should be worth north of 1,000p.

Lookers: Crazy or Contrarian?

I exited the automotive sector in January when I sold the SIF folio’s holding in used car supermarket Motorpoint.

But I’m now mulling a return. Car dealership group Lookers (LON:LOOK) has cropped up in my screening results this week.

This company’s history can be traced back to 1908, when it was founded as a bicycle retailer. Lookers started selling cars in 1910 and made its first acquisition in in 1960. Since then it’s grown steadily and now operates 154 franchised dealerships.

Last week’s 2018 results suggested that the company coped well with last year’s WLTP-induced new car supply restrictions:

  • Revenue +4% to £4,880m

  • Gross profit +2.3% to £515.5m

  • Pre-tax profit -9% to £53.1m

  • Net debt -11% to £86.9m (equivalent…

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